Background and purpose of the Corporate Governance
Principles and Recommendations (3rd Edition)

The purpose of the Corporate Governance Principles
and Recommendations (3rd Edition) (P&Rs) is to provide
guidelines for ASX listed entities to follow in order to achieve
good corporate governance results. The P&Rs are not mandatory
but the boards of listed entities that choose not to adopt them are
expected to give an explanation (to the market) as to why.

Under ASX Listing Rule 4.10.3, a listed entity is
required to benchmark its corporate governance practices against
the Council's P&Rs. An entity must either include a corporate
governance statement that discloses to what extent it has followed
the P&Rs in its annual report, or publish that statement on its
website. If no corporate governance statement appears in the annual
report, an entity must ensure that one is provided to the ASX at
the same time it gives its annual report.

The 3rd edition of the P&Rs was released on 27
March 2014 and comes into effect on an entity's first full
financial year, beginning on or after 1 July 2104. This means that
an entity with a 30 June or 31 December balance date will be
expected to measure its governance practices against the P&Rs
for the financial year ending 30 June 2015 or 31 December
2015.

Key changes

Recommendation 1.4 - Accountability of the Company
Secretary

The Company Secretary should be accountable to the
board, via the Chair, regarding all matters related to the proper
functioning of the company. This will include, among other things,
advising the board on general governance, coordinating the
completion and timely dispatch of board papers and facilitating the
education and development of directors.

Recommendation 2.1 - Requirement for a Nomination
Committee (NC)

A dynamic, motivated and effective board is
necessary for the adequate running of a listed entity. To this end,
it is suggested that a listed entity should have an NC to ensure
that the current directors and any incoming directors are put
through a 'formal, rigorous and transparent process' for their
appointment or re-appointment.

The role of the NC should be to review and make
recommendations to the board on any succession plan, develop and
implement a process for evaluating the performance of the board and
suitability of new directors, and ensure structures are in place to
manage the succession of a CEO or other senior executive.

The NC should have a charter that clearly sets out
its responsibilities and should ensure that it is sufficiently
independent so as to be able to make decisions that are within the
best interests of the entity.

Recommendation 2.3 - Disclosure of independent
directors

The description of a director(s) as independent
carries great weight and will be relied on by stakeholders in their
dealings with the entity. The label of 'independent' should be
taken seriously and a director listed as such should be free of any
'interest, position, association or relationship that might
influence or reasonably be perceived to influence, his or her
capacity to bring an independent judgment to bear on issues before
the board and to act in the best interests of the entity and its
security holders generally'.

This requires the constant monitoring of a
director's status and any change to his or her independence should
be reported to the market in a timely manner.

Recommendation 7.1 - Risk Committee

It is recommended that the board of a listed entity
have a Risk Committee. This committee is to be independent and will
be charged with implementing a risk management framework. The idea
is to use the framework as a mechanism to bring transparency and
review risks taken by the entity, as well as make recommendations
to the board on both the adequacy of the company's risk management
process and the processes around an incident, which might involve a
breakdown of the entity's internal controls.

Recommendation 7.3 - Internal audit function

A listed entity should have a well-structured
internal audit function that it employs 'for evaluating and
continually improving the effectiveness of its risk management and
internal control processes'. The person(s) nominated as head of the
audit function should be independent of the board and ensure they
maintain an open stream of communication with the board at all
times so as to remain properly informed on the operations of the
entity.

The means by which an entity conducts its business
has a range of effects on various stakeholders, whether they are
employees, members, governments or local communities. Ensuring that
an entity operates sustainably regarding its stakeholders is vital
so as to reduce any negative impact the entity might have across
these spheres and conversely ensure that its operation can continue
to run successfully.

An entity should disclose any 'material exposure'
to economic, environmental and social sustainability risks and the
way in which it intends to manage such risks. 'Material exposure'
has been defined in the P&Rs to mean a 'real possibility that
the risk in question could substantially impact the listed entity's
ability to create or preserve value for security holders over the
short, medium and long term'.

Obviously, exposure to any of the aforementioned
risks can hamper the operation and profitability of an entity. The
material exposure requirement is an attempt to create transparency
for current members and future investors by generating a more
holistic picture of an entity and its business operations.

Conclusion

ASX listed entities should, upon falling within the
timing parameters set out, measure their current practices against
the P&Rs. Accordingly, any oversights should be corrected and
new recommendations adopted.

The P&Rs are available here:
http://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf

For more information or for assistance in
understanding and meeting your obligations, please contact
us.

Author: Jake Saccarado

Contact: Ian Sinclair

Background and purpose of the Corporate Governance
Principles and Recommendations (3rd Edition)

The purpose of the Corporate Governance Principles and
Recommendations (3rd Edition) (P&Rs) is
to provide guidelines for ASX listed entities to follow in order to
achieve good corporate governance results. The P&Rs are not
mandatory but the boards of listed entities that choose not to
adopt them are expected to give an explanation (to the market) as
to why.

Under ASX Listing Rule 4.10.3, a listed entity is required to
benchmark its corporate governance practices against the Council's
P&Rs. An entity must either include a corporate governance
statement that discloses to what extent it has followed the
P&Rs in its annual report, or publish that statement on its
website. If no corporate governance statement appears in the annual
report, an entity must ensure that one is provided to the ASX at
the same time it gives its annual report.

The 3rd edition of the P&Rs was released on 27 March 2014
and comes into effect on an entity's first full financial year,
beginning on or after 1 July 2014. This means that an entity with a
30 June or 31 December balance date will be expected to measure its
governance practices against the P&Rs for the financial year
ending 30 June 2015 or 31 December 2015.

Key changes

Recommendation 1.4 - Accountability of the Company
Secretary

The Company Secretary should be accountable to the board, via
the Chair, regarding all matters related to the proper functioning
of the company. This will include, among other things, advising the
board on general governance, coordinating the completion and timely
dispatch of board papers and facilitating the education and
development of directors.

Recommendation 2.1 - Requirement for a Nomination
Committee (NC)

A dynamic, motivated and effective board is necessary for the
adequate running of a listed entity. To this end, it is suggested
that a listed entity should have an NC to ensure that the current
directors and any incoming directors are put through a 'formal,
rigorous and transparent process' for their appointment or
re-appointment.

The role of the NC should be to review and make recommendations
to the board on any succession plan, develop and implement a
process for evaluating the performance of the board and suitability
of new directors, and ensure structures are in place to manage the
succession of a CEO or other senior executive.

The NC should have a charter that clearly sets out its
responsibilities and should ensure that it is sufficiently
independent so as to be able to make decisions that are within the
best interests of the entity.

Recommendation 2.3 - Disclosure of independent
directors

The description of a director(s) as independent carries great
weight and will be relied on by stakeholders in their dealings with
the entity. The label of 'independent' should be taken seriously
and a director listed as such should be free of any 'interest,
position, association or relationship that might influence or
reasonably be perceived to influence, his or her capacity to bring
an independent judgment to bear on issues before the board and to
act in the best interests of the entity and its security holders
generally'.

This requires the constant monitoring of a director's status and
any change to his or her independence should be reported to the
market in a timely manner.

Recommendation 7.1 - Risk
Committee

It is recommended that the board of a listed entity have a Risk
Committee. This committee is to be independent and will be charged
with implementing a risk management framework. The idea is to use
the framework as a mechanism to bring transparency and review risks
taken by the entity, as well as make recommendations to the board
on both the adequacy of the company's risk management process and
the processes around an incident, which might involve a breakdown
of the entity's internal controls.

Recommendation 7.3 - Internal audit
function

A listed entity should have a well-structured internal audit
function that it employs 'for evaluating and continually improving
the effectiveness of its risk management and internal control
processes'. The person(s) nominated as head of the audit function
should be independent of the board and ensure they maintain an open
stream of communication with the board at all times so as to remain
properly informed on the operations of the entity.

The means by which an entity conducts its business has a range
of effects on various stakeholders, whether they are employees,
members, governments or local communities. Ensuring that an entity
operates sustainably regarding its stakeholders is vital so as to
reduce any negative impact the entity might have across these
spheres and conversely ensure that its operation can continue to
run successfully.

An entity should disclose any 'material exposure' to economic,
environmental and social sustainability risks and the way in which
it intends to manage such risks. 'Material exposure' has been
defined in the P&Rs to mean a 'real possibility that the risk
in question could substantially impact the listed entity's ability
to create or preserve value for security holders over the short,
medium and long term'.

Obviously, exposure to any of the aforementioned risks can
hamper the operation and profitability of an entity. The material
exposure requirement is an attempt to create transparency for
current members and future investors by generating a more holistic
picture of an entity and its business operations.

Conclusion

ASX listed entities should, upon falling within the timing
parameters set out, measure their current practices against the
P&Rs. Accordingly, any oversights should be corrected and new
recommendations adopted.